What is a trading system?

Erfan Cryptocurrency November 27, 2021

Read the trading system in this article and design a useful program for yourself. The content provided is for people who have no plans for their transactions and do not know at all when, how much to buy cryptocurrencies and when to sell them. If you’re arguing with yourself that I’m making the best deal this time around and you’re failing every time, do not miss this article because you’re going to design a trading system for yourself.

What is a trading system? Why do we need it?

To design a personal trading system, you must have accurate information about the trading system to design the best program. Just as you plan for yourself for all your daily activities, such as waking up at 7 a.m. and eating breakfast at 7:30 a.m., the trading system follows the same rule; That means you have to trade on a specific date and time.

If we want to have a more precise definition of a trading system, we can say that it is “a set of actions that are scheduled at different time intervals to perform a specific action (analysis, purchase, sale, etc.).” In digital currencies, the trading system is usually used to enter and exit charts and stop-loss, but this is not the only application of this system.

Suppose you start today without any plans. Which digital currency are you analyzing? How much of your capital have you invested in the market? What indicators do you use to analyze cryptocurrencies? Are your transactions hourly or daily? Rest assured that in such a situation you will have no knowledge of your assets and you do not know exactly what your purpose is.

But today you are going to get acquainted with the trading system and design a very good trading program for yourself to know exactly what time you should execute what. When you use a trading system, you have a better understanding of the market and you can predict future moves to get better results.

The trading system consists of three main factors: at the right time, at the right price, and in the right pattern, it tells you at what price to enter, place your stop, and when to leave.

How to build a trading system?

If you do not have a standard and useful trading system program, be sure to pay attention to the above points. For this purpose, you should consider various factors, and by putting them together, you can successfully reduce your distance and achieve the desired result. An overall trading system includes the time frame trading, asset management, market psychology, and individual psychology, and that it is useful to briefly talk about them.

1. Determining the trading market

One of the most important choices for a trader is to define the trading market. That is, decide to work in the field of digital currencies and market cryptocurrency or go to other financial markets. Try to be the best in a trading market, until you have a small activity in each market. It is also important to remain stable in the market. That means immersing yourself in digital currencies for a week and moving to other financial markets another week.

2. Choosing a market analysis method

What method do you choose to buy and sell? Are you familiar with the types of analysis in the digital currency market? We suggest you read the article How to Pattern Recognition in Technical Analysis to get a better idea of the types of analysis. If we want to talk about them briefly, we must say that you have to use technology and to buy and sell cryptocurrencies analysis fundamental analysis.

It is possible to use only technical analysis or only fundamental analysis. But the best way is to get help from both of them and use indicators technical analysis along with fundamental news.

3. Determining the trading style

There are several types of trading styles that you can choose from based on your trading characteristics. Do not forget that gaining experience and expertise in one method can be much more valuable to you than you think.

Trading methods are each used in specific situations and you have to make your purchase according to the market position. The following is a brief introduction to these methods:

Scalping

Scalping is the shortest method of trading. For example, a trader enters a trade only in a very short period (a few minutes) and leaves quickly. There are different times for scalping; But to better understand, we can say that the deal ends with just a few new candles.

Accuracy and focus, as well as the speed of action in this trading method, are very important; Because you will have very little opportunity to make decisions.

Day Trading

Daily traders, as the name implies, make daily trades and spend more time on the chart than people who use the scalping method; Therefore, they have less stress because they have more time to analyze the desired cryptocurrencies.

To be more precise, daily traders do not open their trading position for more than a few days, except in special circumstances and special trading systems. They usually leave the trading market on the same day they enter the market; For example, if you open 5 positions on Saturday, you will close your positions until the end of the night. Sometimes it limits the time of the trader and he has to close the position faster and leave the market.

Swing Trading

Sometimes the price chart follows a uniform trend. This trend may be downward or upward. People known as oscillators take advantage of this situation and, by scientific analysis, determine the approximate time to complete their trade.

People who use the swing method usually do not spend much time on digital currencies; Because they may have chosen this job as their second source of income, they do not need to study cryptocurrencies for long periods. This method is used as a medium-term trading method, and you should find out which one is the best method for your trading system through various studies.

Position Trading

In terms of time, people who work in trading positions are in a long period. Most of them are known as holders. These people use monthly and weekly charts to enter and exit transactions. If you are a holder, you know that you do not have to always be aware of the price chart and worry about when to buy.

The trading position is suitable for people who have good capital and intend to make a profit from this capital. Weeks and months may be the distance between their entry and exit. Of course, in some cases, it may take years to hold, which, given the trader’s analysis and analysis, will certainly yield a multiplier return on his capital.

4. Different time frames in the trading system

As mentioned in the previous section, the types of important factors, time, and timeframes that you can use are divided into three main sections, short-term, medium-term, and long-term. Depending on your job, economic situation, and time, you can work in any of the periods. If you are busy and can not sit behind your computer system continuously, then trading position and swing style is right for you.

If you have enough time to analyze digital currencies, use your time and do daily trading. Scalping is also a great way for people who do not like to wait and want to get their homework done very quickly and are worried if their deal does not end; So the time frame in which you intend to trade is very important.

5. Trading system with market psychology

Market psychology is also one of the factors that a successful trader should be aware of and implement his next move based on this issue. Sentiment analysis in financial markets is called sentimental. In this regard, you can read the article Introduction to sentimental analysis + introduction of three important tools for sentimental analysis to have a better understanding of market psychology.

Therefore, the trading system, in addition to having the previous cases, needs to analyze the emotions. Emotion analysis increases your knowledge of the people who trade and you can predict their behavior in different situations.

6. The key is capital management!

The trading system needs management. Profit and loss administration is one of the most important points that have a direct role in your success. Capital management in the trading system is planning that allows you to consider the right amount for each transaction and at the end of the daily trading, determine your profit and loss. You even have to anticipate how much your future trading will be profitable. Has the profit of the last week been less than the loss?

All of these are part of the trading system. In principle, by managing capital, you protect your assets against potential losses and are diligent in maintaining them. With a wrong deal and choosing the wrong maybe leverage, the whole capital is destroyed and so-called liquidated; So be very smart about capital management so that your trading system is perfect.

Note that all of the above requires digital currency training and to work in them you must be familiar with the techniques and applications of each. That means managing capital well and choosing the right leverage for transactions, using the buying and selling methods properly.

Summary to build a trading system

The trading system is one of the most important factors that every trader should take action to have. If you do not have your trading system, be sure to use the contents of this tutorial and make the best plan for yourself. In general, 6 items play a key role in the trading system, which are:

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